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The Flat Fee Advantage
Overview
The card association in conjunction with the banks that issue the credit cards to the consumer actually set the transactional cost of credit card processing (known as interchange). They then pass along this transactional cost to the processor, who in-turn adds a profit before providing the retail rate and service to the merchant. The cost or “interchange” is now public knowledge and posted on the card brands respective websites.
Understanding Tiered Pricing
Tiered pricing utilizes the 160 +/- individual transactional costs (know as interchange) each transactional cost comprised of a) unique percent of the sale, and b) transaction fee, both which are dependent upon the type of card used i.e. (debit, credit, rewards, business etc..) And how the purchase was made (in person, over the phone etc…). These transactional costs (which are the same for all merchants large and small) are categorized into either three or four tiers with each tier housing approximately 40 of the 160 transactional costs or (interchange).
The Challenge With Tiered Pricing
Twice a year visa / mc reviews and adjusts some of the 160 +/- transactional costs and passes this change along to the processor, who in-turn, usually seizes that as an opportunity to raise the tiered rates to the merchant and create additional profit made on each of its “tiers” (the difference between the underlying transactional cost and tiered retail rate) thus raising the entire expense for the merchant, even if the underlying transactional cost is never actually applied against the merchant for a transaction. Ultimately this is what causes the merchants fee to creep upwards over time. Its not simple, its not transparent and its not fair pricing.
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Tiered Pricing Example
Lets assume a merchant has the following monthly activity for credit and debit cards:
$83.00 average ticket.
180 transactions for the month.
$15,000 per month in gross bankcard sales with tiered pricing:
Merchant Calculation on Tiered Pricing |
Tier |
(%) of sale |
($) of sale |
(TX’s) |
|
($) Cost |
Cost Calculation |
1 |
40 |
6000 |
72 |
|
97.80 |
15K (x) 40% (x) 1.39 + 72 X $0.20 |
2 |
20 |
3000 |
36 |
|
57.90 |
15K (x) 20% (x) 1.69 + 36 X $0.20 |
3 |
20 |
3000 |
36 |
|
78.90 |
15K (x) 20% (x) 2.39 + 36 X $0.20 |
4 |
20 |
3000 |
36 |
|
105.90 |
15K (x) 20% (x) 3.29 + 36 X $0.20 |
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340.50 |
|
Overall cost in this scenario being $340.50 per month.
The problem with this methodology is many:
- Difficult to understand
- Allows rates to artificially increase over time
- Not transparent
NPS Pricing Solution with Transparency
NPS (Novera) has developed a unique pricing format that passes along all the direct transactional costs; a) interchange, and b) the processor costs and then adds c) small FLAT FIXED FEE per month depending upon the monthly merchant volume. This amount is essentially the gross margin on the account.
This pricing format delivers:
- Substantial savings based upon volume
- Transparency in pricing
- Detailed reporting on statement
- Best “cost plus format” available
- Flat fixed fee never changes. The savings can actually increase over time because unlike the “tiered” structure which raises the overall rate of the tiers when rates change, our program only raises the one line item affected, this is the only true transparent way of offering merchant processing.
Novera Flat Fixed Fee Pricing Example - (compared)
MONTHLY FLAT FIXED FEE BASED UPON VOLUME RANGE
All costs plus .06 cent Processor TX Fee & $7.50 Customer Service Fee & Volume Based Fee of; |
Monthly Volume Range |
Volume Based Fee |
$0.00 to $15,000 |
$39.95 per month |
$15,001 to $50,000 |
$49.95 per month |
$50,001 to $75,000 |
$59.95 per month |
$75,000 and over |
$69.95 per month |
Overall Cost In This Scenario Being $311.07 Per Month.
$260.32 – Estimated "Cost" Or "Interchange" (From Chart Below)
$ 39.95 – Our "Flat Fixed Monthly Fee" (From Chart Above)
$ 10.80 – Processor $06 Cent Transaction Cost
$311.07 – Total Overall Cost
$29.43 Per Month Savings Or $353.16 Per Year.
Main benefit: If ANY line item in the "Cost" or "Interchange" (below) ever
changes, we only pass along the cost of that line item, thus saving the
merchant from any hidden price increases.
INTERCHANGE TABLE
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Contact Us
703.865.3011 X 701
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Merchant Support
In the unlikely event you require support for any of our products and services you can rest assured WorldPay’s 24 / 7 customer support line is their for your convenience. Please have your merchant or terminal number for faster service. 1-800-200-5965 option (3)
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